Thursday, April 11, 2013

Serbia holds rate for 2nd month, sees inflation on target

Serbia's central bank held its benchmark interest rate unchanged at 11.75 percent for the second month in a row, saying its current restrictive stance would help ensure that inflation continues to decline and returns to the central bank's target range in the second half of the year. The National Bank of Serbia paused last month after eight interest rate hikes since last June, but warned that the restrictiveness of its policy stance would be affected by consistent fiscal consolidation, financial market developments and the growth prospects of foreign trading partners. Serbia's inflation rate eased to 12.4 percent in February, down from 12.8 percent in January, but up from December's 12.4 percent, and well above the central bank's target range of 4.0 percent, plus/minus 1.5 percentage points. Although the economy continued to shrink in the fourth quarter of 2012, the national bank said exports were rising, supporting a "nascent economic recovery." Serbia's Gross Domestic Product shrunk by 0.3 percent in the fourth quarter from the third, the second quarterly contraction in a row, for an annual fall of 2.0 percent, the fourth quarter in a row where the economy has been contracting on an annual basis.Serbia's inflation rate started accelerating in April last year after hitting a 30-year low of 2.7 percent and peaked at 12.9 percent in October due to higher agricultural prices and administered prices.The central bank estimates that Serbia's economy contracted by 1.7 in 2012 and forecast an expansion of 2.5 percent in 2013.

In March the central bank also said it expects inflation to return to its target but it did not say when.